Value
6.8/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 5.2 |
| P/S | 8.1 |
| EV/EBITDA | 4.6 |
| Fwd P/E | 8.3 |
| PEG | 10.0 |
| Analyst target | 4.0 |
- ▸Forward P/E: 14.1x
- ▸PEG: 0.20
NTCT · Why this verdict
Why NetScout Systems (NTCT) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results. How we score · Editorial policy
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VerdictSELL
Overall score6.1/10
ConfidenceMEDIUM
MacroRISK_OFF
TrendMatrix Research · core thesis
Engine thesis — one sentence
NetScout has beaten earnings four quarters in a row with excellent cash conversion, a wide moat and a 14.2x forward multiple, but sole-source hardware suppliers, small insider selling and a price above the analyst target limit the upside.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Valuation is reasonable, with a forward P/E of 14.2x and a PEG of 0.20, supported by double-digit revenue growth. Valuation breakdown | The forward P/E should stay below 18x while earnings grow. | →Stable |
| CounterQuarterly revenue of $210.4M is only about 12.7% above the year-earlier $186.7M and was $250.7M in December 2025, so growth is seasonal and uneven. | ||
The company depends on sole-source suppliers for hardware components, so supply continuity underpins quarterly revenue. Bear case | Quarterly revenue stays at or above the year-earlier $186.7M with no supply interruption. | ↓Deteriorating |
| CounterThe 10-K flags this as a high concentration risk, and a single supplier problem could delay shipments and cut revenue in a quarter. | ||
Cash conversion is excellent at 187% FCF to net income, the economic moat is wide and the Piotroski F-Score is 9 of 9. Quality breakdown | Free cash flow should stay above net income over the next 12 months. | →Stable |
| CounterOperating margin scores only 2.8 and return on equity only 2.5, so earnings power is modest despite the strong cash conversion. | ||
The company beat EPS estimates in all 4 of the last quarters with an average surprise of about 27.2%, including a 33.3% beat to $0.52 in the latest report. Earnings track record | EPS should keep meeting or beating estimates at the 5 November 2026 report. | ↓Deteriorating |
| CounterSurprises are measured on small EPS bases of $0.39 to $0.82, and a strong beat in February 2026 sets a high bar for the next comparison. | ||
Price of $39.67 is 7.1% above the $36.87 analyst target, with about 5.8% downside to the $37.39 stop. Upside pct | Analyst targets should rise toward the current price if beats continue. | →Stable |
| CounterA negative reward-to-risk of -1.2 and 4 insider sales worth $813,184 in 90 days leave little cushion if results disappoint. | ||
Valuation is reasonable, with a forward P/E of 14.2x and a PEG of 0.20, supported by double-digit revenue growth.
→StableValuation breakdown
- Expectation
- The forward P/E should stay below 18x while earnings grow.
CounterQuarterly revenue of $210.4M is only about 12.7% above the year-earlier $186.7M and was $250.7M in December 2025, so growth is seasonal and uneven.
The company depends on sole-source suppliers for hardware components, so supply continuity underpins quarterly revenue.
↓DeterioratingBear case
- Expectation
- Quarterly revenue stays at or above the year-earlier $186.7M with no supply interruption.
CounterThe 10-K flags this as a high concentration risk, and a single supplier problem could delay shipments and cut revenue in a quarter.
Cash conversion is excellent at 187% FCF to net income, the economic moat is wide and the Piotroski F-Score is 9 of 9.
→StableQuality breakdown
- Expectation
- Free cash flow should stay above net income over the next 12 months.
CounterOperating margin scores only 2.8 and return on equity only 2.5, so earnings power is modest despite the strong cash conversion.
The company beat EPS estimates in all 4 of the last quarters with an average surprise of about 27.2%, including a 33.3% beat to $0.52 in the latest report.
↓DeterioratingEarnings track record
- Expectation
- EPS should keep meeting or beating estimates at the 5 November 2026 report.
CounterSurprises are measured on small EPS bases of $0.39 to $0.82, and a strong beat in February 2026 sets a high bar for the next comparison.
Price of $39.67 is 7.1% above the $36.87 analyst target, with about 5.8% downside to the $37.39 stop.
→StableUpside pct
- Expectation
- Analyst targets should rise toward the current price if beats continue.
CounterA negative reward-to-risk of -1.2 and 4 insider sales worth $813,184 in 90 days leave little cushion if results disappoint.
Per-dimension breakdown
Quality
6.5/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 2.5 |
| ROA | 2.4 |
| Gross margin | 10.0 |
| Op margin | 2.8 |
| Net margin | 6.9 |
| Current ratio | 6.5 |
| FCF quality | 10.0 |
| Moat | 7.9 |
| Rule of 40 | 5.5 |
| Piotroski F | 10.0 |
- ▸Excellent cash conversion: 187% FCF/NI
- ▸Wide economic moat
- ▸Strong Piotroski F-Score: 9/9
Growth
7.8/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 5.7 |
| EPS growth | 10.0 |
Momentum
4.5/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.5 |
| MACD | 7.7 |
| OBV | 1.0 |
| MA position | 6.0 |
| Volume | 2.2 |
- ▸Volume distribution (falling OBV)
- ▸Above 200-day MA
Sentiment
4.9/10data confidence 100%| Component | Sub-score |
|---|---|
| LLM sentiment | 3.5 |
| Analyst rating | 5.0 |
| Price target | 6.4 |
Insider
4.1/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 4.5 |
| insider conviction | 2.0 |
| holder change | 5.9 |
- ▸Modest insider selling — $813,184 (0.028% of mkt cap)
Peer rank
5.9/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 5.6 |
| quality rank | 5.3 |
| growth rank | 4.1 |
- ▸Conservative debt levels
Technical
6.1/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 5.4 |
| support resistance | 5.5 |
| 52w position | 7.5 |
Risk (lower is worse)
5.8/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 7.0 |
| days to cover | 4.7 |
| volatility | 4.6 |
| put call | 5.2 |
| implied vol | 3.5 |
| max pain risk | 3.0 |
| beta | 8.9 |
| debt equity | 9.9 |
- ▸Above max pain $25
- ▸Concentration risks: 1 HIGH (10-K Item 1A — sized via position_sizing, validated via buy_confidence)
Catalyst
7.0/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 10.0 |
| news activity | 5.0 |
- ▸Perfect beat streak: 4Q
- ▸Earnings in 6 days
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (3)
- INSIDER:OK
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (5)
- MOMENTUM:4.5<4.5
- ASYMMETRY:-1.1=NEGATIVE
- 8K_CRITICAL:4.01
- NEWS_SOFT:LEADERSHIP_CHANGE
- EARNINGS_PROXIMITY:6d<=7d
Warning (0)
none
Reward-to-Risk
-1.06
Upside
-6.7%
Downside
6.3%
Sizing output
AVOID
SetupBreakout — Golden cross, above all MAs, RSI 51, MACD bullish
EdgeNo clear edge — No clear edge identified
SuitabilityAggressive — MCap $2.9B<$5B
Investment implication
The F-path SELL output reflects an overall score of 5.3 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Growth at 7.8) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( MOMENTUM:4.5<4.5, ASYMMETRY:-1.1=NEGATIVE, 8K_CRITICAL:4.01) reinforce the read. Current asymmetry R:R is -1.06 — supplementary context, not the trigger for this path.
The strongest dimensions are Growth at 7.8, Catalyst at 7.0, and Value at 6.8; the weakest are Insider at 4.1, Momentum at 4.5, and Sentiment at 4.9. The V9 engine flagged 5 failed gates, producing an asymmetric reward-to-risk of -1.06 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Perfect Earnings Beat Streak
Trip ifEPS surprise stays below 0% for 2 consecutive quarters.
- P2Excellent Cash Conversion Moat
Trip ifFree cash flow to net income falls below 100% from the current 187%.
- P3Low Forward Multiple
Trip ifForward P/E rises above 20x from the current 14.2x.
- P4Price Above Analyst Target
Trip ifPrice falls below the $37.39 stop, a drop of more than 5.7% from $39.67.
- P5Sole Source Hardware Suppliers
Trip ifQuarterly revenue falls below $186.7M from the current $210.4M.